“Suspect Counterfeit”: Fake Electronics in US Defense Equipment

The steady rise in the number and variety of electronic systems in military equipment has spawned 2 trends. One has been reduced readiness, as multiplying points of failure consistently push readiness rates down and maintenance costs up, for each successive generation of advanced equipment. The other is a security issue, as equipment “obsoletes itself every 18 months, is made in unsecure locations and [in an industry where] we have absolutely no market share influence [any more].”

The defense industry that played such a big role in building Silicon Valley now grapples with ways to ensure that chips and circuits don’t have hidden design codes in them. They’re also grappling with the issue of counterfeit electronics.

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“Suspect Counterfeit”: The Issues

Fakes inside…(click to view full)

The counterfeiting problem is, in part, a natural consequences of electronics life cycles vs. military life cycles. Production of the parts in question may end in 3 years, even as the platform they’re installed in serves for 30. At the same time, even combining defense and civil aerospace only gets you to less than 1.5% of total microelectronic semiconductor sales.

The military periodically issues contracts to redesign their equipment “for obsolescence,” which means designing the old electronics out, designing modern electronics in, and installing them. A more frequent response involves purchasing discontinued parts from independent distributors or brokers. Most distributors are reputable, but the nature of the market lends itself to “grey traders” by its very nature, especially when the supply chain becomes several layers deep.

For electronic parts, our industry’s generally definition of “counterfeit” or “suspect counterfeit” usually involves used parts that are altered and sold as new. “Suspect counterfeit” is the most frequent term, in the absence of explicit confirmation from the original manufacturer about the authenticity of the part. That can be extended to an entire lot, if a sample of parts display signs of counterfeiting.

Counterfeit parts pose a 2-fold risk. The most frequent risk of the fraud is that the counterfeit components will be much less reliable. A smaller, but concerning risk involves the potential for parts with “extra” added features, which could act to compromise security.

The fact that the trail for counterfeit parts leads to China, which is also a notorious global cyber-security threat, ensures that concern over both possible outcomes remains high. Indeed, the US Senate Armed Service Committee’s own efforts led them to identify China as the origin for counterfeit parts 70% of the time. Another 20% of the cases led them to Britain and Canada, which have themselves become resale points for counterfeit Chinese electronics.

Contracts & Key Events

THAAD test launch(click to view full)

Nov 8/11: At US Senate Armed Services Committee hearings on Counterfeit Electronic Parts in the DOD Supply Chain, it’s revealed that suspect electronic parts from China have been installed on a variety of military systems and subsystems: thermal weapons sights; THAAD missile mission computers; C-17s (flight displays), C-27Js (flight displays), C-130Js (flight displays), and P-8A (ice detection module) planes; and AH-64, SH-60B (FLIR system), and CH-46 (flight displays) helicopters. BAE, Boeing, and L-3 are highlighted as examples, in part due to notification delays. As one example, take L-3’s issues:

“The Committee traced the counterfeit [display video memory] chips to Hong Dark Electronic Trade in Shenzhen, China, who sold the parts to Global IC Trading Group… which, in turn, sold them to L-3 Displays for use in display units. More than 500 display units containing suspect parts were sold to the Air Force, the Navy, and to defense contractors, intended for installation on the C-27J, C-130J, and C-17 aircraft, as well as on the CH-46… In total, the Committee identified nearly 30 shipments, totaling more than 28,000 electronic parts from Hong Dark to Global IC Trading Group that were subsequently sold to L-3. At least 14,000 of those parts have been identified as suspect counterfeit. Neither the Committee nor L-3 knows the status of the remaining 14,000 parts. L-3 has not yet identified what military systems they might be in.”

On the flip side, the US Missile Defense Agency may have an approach worth copying. In 2009, they limited contractors to buying parts from the original manufacturer or authorized distributors. If this isn’t an option, the contractor must convince MDA that it needs to go to an independent distributor, and must also agree to rigorously test those parts. SASC hearing page | Testimony of L-3’s VP Corporate Procurement, Ralph L. DeNino | Testimony of US MDA Director Lt. General Patrick J. O’Reilly || Sen. Levin Backgrounder | Boomberg | Defense News.

March 2011: Senate Armed Services Committee Chair Carl Levin [D-MI] and Ranking Member John McCain [R-AZ] announced an investigation into counterfeit electronic parts in the Department of Defense’s supply chain.

January 2010: The US Department of Commerce’s Bureau of Industry and Security publishes the report, “Defense Industrial Base Assessment: Counterfeit Electronics” [PDF], which included the results of a survey of 387 companies and organizations in the defense supply chain. Detected counterfeit instances rose from 3,868 incidents in 2005 to 9,356 incidents in 2008, with China overwhelmingly identified as the source. See also: HP Blog Hub

June 2007: US Naval Air Systems Command (NAVAIR) askes the US Department of Commerce’s Bureau of Industry and Security Office of Technology Evaluation (BIS-OTE) to conduct a defense industrial base assessment of counterfeit electronics.